Our friends over at the Major Energy Users Council sometimes appear to share the not uncommon pitfall of procurement "professionals" who find the process more compelling than the result. Obsessing about hitting targets mostly misses what should surely be the point, i.e. reducing costs. Many energy professionals, egged on by consultants who sell a solution to what isn't a problem for most people, get bogged down in what will ultimately be futile: they try to beat the market. Those most averse to risk, end up paying far more for energy than those who go with the flow of markets.
The MEUC's most recent magazine gets rightly exercised over the problem of security deposits which many suppliers now require, even from existing customers. In some case up to seven months depost is required. A name withheld letter bemoans the practice, while overlooking the cure.
What is going through the minds of our energy suppliers? Recently we have been prevented from securing a one-year fixed term contract with our electricity supplier and have been forced to sign up to a one month flexible deal. Last month, our supplier asked for a security payment equivalent to four months usage, which it will hold indefinitely. To make matters worse we decided to change supplier, but when we asked no less than eight other providers if they would tender for our contract, not one had the decency to respond. I thought the energy industryhad been opened up to free market trade Firstly, in a free market, suppliers are free to turn away business as well as seek it. Freedom works both ways. But what's this about being "forced" to a flexible deal ? A one year electricity price from October is 20% higher than the month ahead cost. In gas a one year deal is 38% higher than the current July price. The writer here sounds as if they are forcing themselves to lock in higher price all in the name of avoiding "risk". Monthly index prices via AMR or Smart Metering, remove much of the risk from suppliers. That will be reflected in the amount, if any, of any security deposit. Flexiblity is the cure for energy risk, not the disease, and security deposits are a self imposed symptom.
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